The importance of exports in sustaining market opportunities for
U.S. agriculture is a topic of interest for public and private
sector decision makers. The share of agricultural production
(based on value or volume) sold outside the country indicates the
level of U.S. agriculture's dependence on the foreign market as
well as the overall size of the market for U.S. agricultural
products. Over the past two decades, the share of production
based on value rose from 13 percent in 1990 to 18 percent in 2009,
while the share based on volume remained relatively stable at
around 20 percent over the same period. Our analysis presents
current estimates of both ratios, describes the methodology used to
calculate them, and assesses the differences between measuring
production by value or by volume.

The units of measurement must be consistent to ensure that
computed ratios are valid. Both export measures-value and
volume-include amounts that are either added to or subtracted from
the original measure for production at the farmgate. More
than half of U.S. agricultural exports consist of products with
value added from processing, such as honey, wine, and cheese.
As such, their dollar value includes the cost of processing.
Export volume or quantity, on the other hand, is recorded in
product weight (as opposed to farm weight) by U.S. Customs and
Border Protection. Product weight is the weight of a product as it
is sold at the retail level. Farm weight is the weight of a
commodity as measured on the farm before further conditioning and
processing. If these differentials are not accounted for, the
percentage of exports as a share of production will be incorrectly
calculated, resulting in under- or overestimates.

The dollar value of these food exports came from the trade
database of the U.S. Department of Commerce's International Trade
Administration. The food groups are identified according
to the North American Industry Classification System (NAICS)
code. For our purposes, they are grouped as unmanufactured
agricultural products (code 111, "Crop Production") and as all
processed foods (code 311, "Food Manufacturing").

Since 1990, the volume of U.S. agricultural exports has
grown by 1.2 percent annually, on average. The corresponding
export values increased 4.9 percent annually from 1990 to 2009;
thus, export unit values of all farm products rose by about 3.75
percent annually during the past two decades. Export prices
of nonfood products, which are largely bulk commodities, climbed
1.9 percent per year over the same period. Based on an annual
export volume growth of 3 percent and 2 percent since 1990 for
processed and unprocessed food exports, respectively, export unit
values for processed foods increased 3.3 percent per year, on
average, while unprocessed food prices climbed 1.8 percent per
year. Thus, not only is the volume of processed food exports
growing faster than unprocessed foods, but their prices are also
increasing faster. Given that processed food exports are
mostly high-value products and unprocessed foods are largely bulk
commodities with lower per unit values, their relative growth
patterns favor processed food exports.

We estimated the volume of U.S. agricultural production as the
sum of food and nonfood farm production. Like exports, total
food production is aggregated from the production volumes of all
food groups in the ERS Food Availability Data System. Nonfood
production came from both PSD data and from USDA's National
Agricultural Statistics Service (NASS) commodity data. U.S.
agricultural production volume expanded at 1.25 percent annually
from 1990 to 2009, or a weighted average of 1.6 percent growth for
animal products and 1.2 percent for plant (crop) products.
The food component of agricultural production increased 1 percent
annually for both processed and unprocessed foods over the past two
decades. Thus, nonfood farm commodity production grew at a
faster pace than food production based on either volume or physical
weight.

We estimated the value of U.S. farm and food production as the
sum of total farm cash receipts (minus aquaculture) and the value
added by food manufacturers (NAICS 311 minus fish/seafood).
We accounted for the cost of raw materials used in food
manufacturing in farm cash receipts. Farm sales receipts came
from the ERS U.S.
Farm Income database, and value-added data for food
manufacturing came from the U.S. Census Bureau's Annual Survey of Manufactures (ASM).
Total agricultural production value annual growth rate averaged
around 3.26 percent from 1990 to 2009. This trend indicates
that agricultural prices at the producer level increased 2 percent
per year over the past two decades. Processed food
production, as measured by the value added by food processors and
manufacturers, expanded at an annual rate of 4.25 percent,
indicating that producer prices of processed foods have climbed
3.25 percent each year, on average, since 1990. Price
inflation for nonfood farm commodity production was the slowest, at
less than 1 percent through 2009.

Estimating
Export Share

We estimated the share of exports in U.S. agricultural
production based on either volume measures or dollar values of
exports and production. Since agricultural and food exports
consist of unprocessed (bulk) commodities and processed products,
production estimates must include both farm products and food
manufacturing output. The volume of agricultural production
can be measured solely from the physical weight of total farm
output, given that raw materials used by food manufacturers are
part of farmers' output. The value of agricultural production
is similarly calculated: since the value of agricultural exports
includes bulk and processed products, production value reflects
both total farm cash receipts and the value added in food
manufacturing. Again, the cost of raw farm materials used by food
processors is already accounted for in farm cash receipts.

The export share of agricultural production in 2009 was 19.8
percent when estimated based on volume. By comparison, the
export share based on value was 18.3 percent over the same
period. The export share based on volume would be similar to
that based on value if two major farm commodities could be measured
in volume terms. However, farm production of live animals
cannot be transformed easily from number of head to million
pounds. Similarly, nursery and greenhouse crops are not
measured in physical weights. For this reason, these two farm
commodity groups must be omitted even though they have sizable
domestic production volumes and relatively small export amounts.
As a result, their exclusion from aggregate export and
production volumes effectively inflates or overstates overall
export shares based on volume.

The 19.8 percent volume-derived export share estimate for
2009 represents a weighted average of the 21.9 percent export share
for all farm crops and products and the 7.8 percent export share
for animal products. The upward trend for animal products
reflects larger volumes of red meat and poultry meat exported
relative to production. These trends appear to be related to
the declining export shares for feed grains in recent years as
domestic feed grain production was used more frequently to feed
livestock and poultry and to produce ethanol. By contrast,
export shares of oilseeds, especially soybeans and soybean
residues, have increased in recent years as a result of strong
foreign demand from China, particularly since 2003. In
addition, grain product exports, such as distillers' dried grains
(DDGs), increased as more residues from starch manufacturing and
the brewing and distilling industries were shipped abroad.

The 2009 overall export share of 18.3 percent based on value is
a weighted average of export share for processed agricultural
products (15.3 percent) and for unprocessed bulk commodities (22.7
percent). Both measures showed upward trends over the past
two decades. Starting at 10.6 percent in 1990, the aggregate
export share of U.S. agricultural production increased over time as
the value of exports more than tripled for processed exports and
doubled for bulk commodities. When considered individually,
the export shares of animal products and crops increased by 10.7
and 21 percent, respectively, as corresponding export values
expanded relative to production values.

Comparing
Estimates

As mentioned above, the value-based export share was based on
the value of domestic farm production, which was estimated as farm
cash receipts by ERS. The volume-based share uses production
volume, which can be obtained from ERS commodity supply and use
tables and from the FAS Production, Supply, and Distribution (PSD)
database. Both of these estimates of agricultural production
are reliably accurate, but they required further transformation for
our purposes. Aggregating production volumes in terms of a
singular unit of measure involves transforming quantities into
physical weight units. The ERS commodity supply and use tables
provide weight or weight-equivalent measures for all products
except nursery and greenhouse crops and live farm animals.
Since exports of processed products are recorded in product weight,
these units must be transformed into farm or fresh weight
equivalents to be compatible with their original production
weight.

For the value-based measure, calculations must account for the
additional value of manufactured or processed agricultural products
without double counting the value of the raw agricultural materials
used in their production. Adding the shipment value of
processed products to farm receipts would count the cost of raw
agricultural materials twice. Only value added by
manufacturers should be added to farm receipts when estimating the
value of U.S. farm and food production.

There are advantages and disadvantages to using either a
value-based calculation or a volume-based calculation. The
value calculation is preferable to a purely physical measure when
making an economic assessment of agriculture's dependence on the
foreign market. In addition, value can account for all
agricultural and food products exported and produced domestically,
whereas certain products difficult to measure by weight are not
included in volume-based calculations. However, dollar values
can change when prices fluctuate, even in the absence of any volume
change. As such, value-based export shares increase as
commodity prices rise, even though the volume exported remains the
same relative to domestic production. Export shares estimated
based on volume are not directly influenced by price changes-at
least, not in the short run, because of the one- to two-quarter lag
between ordering and shipment. Aggregating exports and
production requires, however, consistent volume units, which means
converting product weights (of exports) into farm or fresh weights
(of production) and converting liquid or quantity units into weight
units. When specific measurement problems occur, such as how
to transform livestock quantity and nursery crops into physical
weights, they are generally excluded from export share
estimates.

Using volume to calculate export shares by commodity group is
preferable to using value because data is readily available from
both ERS and FAS. Export and production values based on NAICS
codes for processed products are more cumbersome to obtain,
requiring access to four online databases. Nevertheless,
production values cover all commodity groups, whereas production
volumes exclude live farm animals and nursery crops.

Characteristics of
Estimates

Aggregating physical weight measures to estimate export shares
introduces a bias for commodities with high moisture content, such
as water-laden produce. For example, grain ingredients needed
to produce a gallon of beer weigh 1.2 pounds, on average, whereas
wine grapes needed to produce a gallon of wine weigh 12.5
pounds. Some commodities with high unit values, such as tree
nuts or planting seeds, have very low physical weights, which
determine their relative weights in aggregated export shares based
on value (higher) as opposed to volume (lower). That is, when
there are more expensive exports, such as processed meat, cheese,
wine, and dried fruit, than lower value exports, such as bulk
commodities, the aggregate export share based on value will exceed
the export share based on volume.

Over the past two decades, overall export shares based on volume
fluctuated in a stable pattern at around 20 percent. This
relatively flat behavior was true also for livestock products and
plant products as aggregate volumes. With respect to
value-based export shares, however, the overall trend increased
gradually. Both animal products and crop export shares seemed
to be trending upward. These trends indicate that the dollar
value of exports was climbing relative to production value; the
per-unit value of exports was rising faster than their domestic
counterparts. This is partially a result of the dollar's
depreciation, which started its long-term decline in 2003. As
the dollar's value dropped, demand for high-value exports picked
up. Nevertheless, value-derived aggregate export shares
remained below volume-based export shares.

The comparatively lower estimates for value-based export shares
may be a result of sizable value-added amounts attributed to food
processors and manufacturers, which were nearly as much as total
farm cash receipts. Since the portion of exported processed
agricultural products was significantly less than that of
unprocessed or bulk farm commodities, the relatively large value of
domestic production of processed products (those not exported)
reduced the overall export share. More importantly, the unit
values of bulk commodities (which had high export shares) were
smaller than unit values of high-value exports (which had lower
export shares). Thus, the export shares of bulk commodities
based on value were generally lower than export shares based on
volume.

While the volume-based measure reduced variations as a result of
product prices, the value measure better reflects product quality,
such as the difference between a pound of steak and a pound of
hamburger. Increased foreign demand for U.S. exports raised
both their volume and value. If greater demand is influenced by a
depreciated dollar, however, there may be stronger demand for
high-value products, such as premium foods and produce, than for
bulk commodities. Although diverging trends may exist between
some agricultural product groups, more exports relative to
production raise both value-based and volume-based aggregate export
shares over the long run.

Since 2003, when the dollar started to depreciate, value-based
export shares rose, driven by the increased purchasing power of
foreign currencies. Volume-based export shares for processed
agricultural products, fresh fruits, nuts, and vegetables rose in
tandem with food and feed grains. Feed grains, which are
increasingly consumed in the domestic market for feed and as fuel
feedstock, are exported as meat, poultry, and dairy products and
processed grain products. If the dollar stabilizes and
exports are less influenced by exchange rate fluctuations,
aggregate export shares by volume or value are expected to trend
consistently over time.

In the long run, the export share trends by commodity group show
rising volume-based estimates for red meat, poultry meat, soybeans,
cotton, tobacco, vegetables, spices, pecans, sweeteners, candy, and
wine. Export shares for wheat flour, corn, sugar, and frozen
fruits, among others, are declining. Nevertheless, more commodities
show rising export shares than declining export shares based on
both volume and value. Given that feed grains accounted for
close to half of the total export volume of crops, their falling
exports relative to production were exerting downward pressure on
the overall U.S. export share. Despite larger corn production
in recent years (2007-09), domestic use for ethanol increased,
diverting supplies away from exports. Thus, volume-based
export shares did not exhibit the same upward trend as value-based
export shares since rising high-value exports were counterbalanced
by lower feed grain export volumes (relative to production).
Excluding live farm animals and nursery crops from volume-based
export shares effectively raised the overall export share because
these two major commodity groups showed minuscule export
shares. Their high dollar values and inclusion in value-based
export shares, on the other hand, pulled down the overall U.S.
export share.

Value-based export shares were the more pertinent indicator
versus volume-based shares when assessing the contribution of
export earnings to the incomes of U.S. farmers and food
manufacturers. To determine how much of the domestic supply
of farm commodities and products exceeded domestic demand, however,
volume-based export shares provided the more relevant
measure. As value-based export shares rose, largely as a
result of higher export prices, dependence on foreign markets as
sources of sales earnings increased even as volume-based export
shares remained relatively flat. The higher the volume of
exports relative to production, the more that available supply (in
excess of domestic market demand) can be diverted abroad, thus the
larger the total market. Ultimately, the larger the portion
of crop harvests or livestock supply that find foreign markets, the
greater the income potential of farmers and processors, whether in
terms of shipment volume or sales receipts.

Data and
Methodology

Data for U.S. agricultural production and exports by volume came
from the ERS
Food Availability Data System and the FAS Production, Supply, and Distribution database
(PSD); commodity data came from USDA's National Agricultural Statistics Service
(NASS). We used the ERS database for food commodity and
product data; we used the FAS and NASS databases for other
agricultural commodities. Units of measurement that were not
provided in physical weight units were transformed using USDA
conversion factors. For example, the wine and beer fluid
volumes were converted into weight equivalents of wine grapes and
grain ingredients per gallon. Commodity production and export
data were aggregated into two sectors: farm animal products and
plant products (crops). Summing the two sectors provided an
overall estimate of the share of exports in U.S. agricultural
production, which was equivalent to the weighted average of the two
sectors' export shares.

We estimated export shares for a food or commodity group by
dividing export volume by production. Unfortunately, FAS does
not have supply and use data for all agricultural commodities
(e.g., hay, tobacco, wool, or hops); production volumes for these
commodities are available from NASS. Other agricultural
exports for which no production volumes are available from USDA or
other sources include hides and skins, essential oils, planting
seeds, fibers, spices, and other fodder. We estimated export
shares by value based on ERS
farm cash receipts, while value-added by manufacturers was
based on data from the U.S. Census Bureau's Annual Survey of Manufactures. Export
values as well as volumes came from the FAS Global Agricultural Trade System (GATS).
For processed products, export values by NAICS codes came from the
U.S. Department of Commerce's International Trade Administration.

Summary export shares by sector and commodity group for selected
years (1990-2009) are provided in table 1. Export shares are
also shown for major agricultural products in table 2. Since
farm cash receipts were calculated by calendar year, we looked at
the export data for January-December. Statistics before 1989
are not readily accessible from the data sources cited above.
Fish and shellfish (aquaculture) were excluded since they are not
classified by USDA as agricultural products.

Since neither the PSD nor NASS databases cover all agricultural
commodities, such as planting seeds, nursery crops, or hides and
skins, those commodities were excluded when estimating export share
from volume. Farm cash receipts of these commodities are,
however, part of U.S. agricultural production value and were used
to estimate value-based export share. Tropical imports, such
as coffee and cocoa beans that are later exported as finished
products, had no corresponding production volumes or values, except
value added in manufacturing.

Another caveat when analyzing and comparing export shares
involves how nonagricultural use of some crops, such as tobacco and
cotton, are treated. Although cash receipts for these crops
are included in total farm production value, exports in the form of
cotton fabric or cigarettes are not defined as agricultural.
Hence, industrial products manufactured from farm commodities were
not counted as part of agricultural exports. These exclusions
lowered export shares, which introduces a downward bias on
estimates derived from these values.

To calculate the total production value of processed products,
the value added from manufacturing was summed for the following
commodity groups and their NAICS codes:

ERS farm cash receipts were used to calculate the production
value of these unprocessed commodities:

Meat animals

Dairy products

Poultry and eggs

Food grains

Feed crops

Oil crops

Cotton and tobacco

Vegetables

Fruits and nuts

Sweeteners

Nursery crops and grass seeds

The sum of value added for processed products and farm receipts
of unprocessed commodities represent total U.S. agricultural
production value upon which total export value is applied to
estimate overall U.S. export share (table 1).